AdEPT Telecom plc (LON:ADT) Chief Executive Officer Ian Fishwick caught up with DirectorsTalk to discuss the acquisition of Comms Group
Q1: You’ve just announced the acquisition of Comms Group, if I can start by asking then, can you tell us how big it is?
A1: It’s going to add around £3.5 million to our revenues so the easiest way to think about it is it’ll increase the run rate on both sales and EBITDA by 12-13% next year so the analysts forecast they’ve raised our EBITDA from £6.1 million last year up to £7 million before March 2017.
Q2: Now what was the rationale behind AdEPT Telecom buying it?
A2: This time last year we bought a company called Centrix and that was our first step into unified communications, it was an Avaya Aura specialist based in Fleet, that acquisition we thought was a good deal when we bought them it’s actually turned into even better than we thought. Essentially, they look at customers who have users say between 150 and 300,000 users and by buying Comms Group this is the other product range from Avaya, this is IP office, and it allows us to build up anything from say 10 users up to 150 so we’ve got the full range of unified comm solutions now.
Q3: Are you planning to leave the site stand-alone or merge it into another of your sites?
A3: Comms Group is based in Northampton and our current positions are based in Fleet and Tunbridge Wells so they’re a little bit too far. We need the expertise of the specialist people who are in Northampton so we’ve committed to them that we’ll leave in Northampton particularly as this is our first sort of tentative step into IT, they started selling IT services perhaps only say 9-10 months ago and got £200,000 revenue already and there’s 2 or 3 specialists there so we can’t move the company so we’ll leave it in Northampton.
Q4: So how are you paying for it and what does your EBITDA to Net Debt ratio look like after the deal?
A4: We’re paying for it entirely through debt, we organised a rolling credit facility through Barclays this time last year, just before we did the Centrix deal, and that was for £15 million so after this deal we’ll have used £10 million of that. Now if we used a £10 million debt against EBITDA forecast of £7 million then you can see the EBITDA net debt ratio is still a modest £1.4 and we still have £5 million of the rolling credit facility left.
Q5: Are AdEPT Telecom likely to do any more acquisitions or do you think this is it for now?
A5: On the basis that we’ve still got £5 million of that revolving credit facility, it’s essentially a facility to full down 2.5 times EBITDA and there’s clearly fire power there to do another one. To be honest, we’re never under any rush to do things, we’ll do one when it’s right, certainly on this one we’ve looked at 25 businesses since December before we eventually settled on Comms Group. So we’re constantly looking and when we’ve got some news we’ll talk to you.
